Graduates and Regional Productivity Graham Gudgin Regional Forecasts Ltd
Extensive Literature in Economics linking Education and productivity: Private returns to Education Cross-Country Studies
Private Returns to Education Wages are higher for better qualified employees. The usual measure is the increase relative to those with no qualifications
Private Returns to Education % Increase in Hourly Wage at Age 33 Qualification MEN WOMEN BASIC 7.2 6.9 GCSE 15.1 11.2 5 GCSE'S 20.8 25.8 A LEVEL 33.6 37.1 DEGREE 51.8 72.5 source Dearden(1999)
Cross-Country Studies A large number of studies have been undertaken examining the impact of education on per capita GDP These find that an extra years education in OECD countries add around 6% to national per capita income Most recent studies use the 1994-6 IALS to directly measure ability in literacy and numeracy. These show an elasticity of 2.5 to per capita GVA from increases in literacy/numeracy. However there is less evidence for an impact of graduatelevel skills alone
My interest is in the impact of educational qualifications on productivity and living standards across UK regions There is good evidence that graduates make a large difference to regional productivity
GVA Difference from UK Average 2003 40 % Pt Difference from UK average 30 20 10 0-10 -20 GL SE EN SW EM WM NW YH NE WW SC NI -30 Region
Components of Regional Differences in Per Capita GVA 2003 Percentage points 45 35 25 15 5-5 Commuting etc Dependency Rate Employment Rate Labour Productivity GL SE EN SW EM WM NW YH NE WW SC NI -15-25 Regions
Employment Rates: Difference From UK Average 2003 6 % point diff. from UK average 4 2 0-2 -4-6 -8-10 SE+GL EN SW EM WM NW YH NE WW SC NI -12
GVA per Head and Productivity 35 25 GVA per Employment GVA per Head % point diff. from UK average 15 5-5 GL SE EN SW EM WM NW YH NE WW SC NI -15-25 Regions
GVA per Employee (UK=100) 115 110 105 100 95 South N.East Wales Scotland N.Ireland UK 90 85 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 (UK = 100)
Regional Wages Closely Reflect Productivity % point diff. from UK average 35 25 15 5-5 GVA per Employee Average Weekly Wages GL SE EN SW EM WM NW YH NE WW SC NI -15 Regions
Average Weekly Wages 2003 LEVEL4/5 QUALIFICATIONS (% of all 16-74) & WAGES BY REGION 700.0 650.0 600.0 550.0 500.0 450.0 400.0 350.0 15.0 20.0 25.0 30.0 35.0 Level 4/5 as % as % of All People 16/74
Highest Qualification of People 16-74 (percent) 2001 all popn aged 16-74 level0 level1 level2 level3 LEVEL4,5 ENGLAND&WALES 31.0 17.9 20.8 9.0 21.4 NE 37.5 18.2 20.3 7.8 16.2 NW 34.3 18.0 20.9 8.3 18.5 YH 35.9 18.6 19.5 8.4 17.7 EM 34.2 19.1 20.3 8.4 18.0 WM 36.6 18.0 20.0 8.0 17.4 EN 30.1 19.6 22.1 8.6 19.6 GL 25.1 13.8 18.0 10.3 32.8 SE 25.7 18.4 22.7 9.9 23.3 SW 28.2 19.1 23.1 9.3 20.3 WW 35.6 16.7 21.3 7.7 18.7 SC 33.2 24.7 15.7 7.0 19.4 NI 41.6 17.2 16.4 9.0 15.8
Average Weekly Wages Reflect % of People Who Are Graduates Average Weekly Full Time Wage ( ) 2003 650 600 550 500 450 400 350 300 y = 8.3367x + 292.54 R 2 = 0.532 Doncaster Stoke Rest of NI Hl Birmingham Carlisle Liverpool Derby Loughborough Glasgow Belf ast Tyneside Manchester Southampton Sw ansea Craw ley Aberdeen Basingstoke Brighton Guildford and Aldershot Edinburgh 9.0 14.0 19.0 24.0 29.0 % Graduates (2001) York Cardif f Bristol Oxford London Cambridge Sources: NES 2003, Census 2001
600.0 550.0 % of EMPLOYED WHO ARE GRADS in PRIVATE SECTOR vs AVERAGE EARNINGS 2001 Surrey Berkshire London WEEKLY WAGE 500.0 Herts Birmingham and Solihull Hants MK, Oxon, Bucks 450.0 Cambs Essex Ches,Warringtn Kent W of England Mersey 400.0 Tyne Derbys N Yorks Tees Durham Mid Wales 350.0 Northumberland y = 12.085x + 268.89 R 2 = 0.8398 300.0 6.0 11.0 16.0 21.0 26.0 31.0 % PRIVATE SECTOR GRADS
600.0 550.0 500.0 450.0 % of EMPLOYED POP 16-74 GRADS in PUBLIC SECTOR 2001 vs Av Earnings 2001 Essex Berkshire Hertfordshire Surrey London TOTAL y = -3.031x + 444.66 R 2 = 0.0047 Cambridgeshire 400.0 350.0 Black Country Lincolnshire and Rutland NI Mid Wales Northumberland 300.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0
Average Weekly Wages 2003 700.0 650.0 600.0 550.0 500.0 450.0 400.0 350.0 LEVEL 0 QUALIFICATIONS (% OF ALL 16-74) & WAGES BY REGION 25.0 30.0 35.0 40.0 45.0 level 0 as % all people 16-74
Average Wages Low in Areas With High levels of Unqualified People Average Weekly Full Time Wage ( ) 2003 650 600 550 500 450 400 350 300 Guildford and Aldershot Belfast NI London y = -5.7969x + 615.04 R 2 = 0.3703 15 20 25 30 35 40 45 % with no qualifications (2001) Dudley & Sandw ell
Highest Qualification By Occupation Scotland 2001 Elementary Machine Operatives Sales Graduates Other Higher Education Personal services Skilled Trades Admin/Secretarial Assoc Professionals Professional Managers 0.0 20.0 40.0 60.0 80.0 100.0 percent
Highest Qualification UK 2003 Percent of Total Other services Public services Finance Tranp,Comms Distribn Constr Manufg Graduate Other HE Energy Agri 0 10 20 30 40 50 60 Percent
GVA per Head Closely Related To Employment in Financial and Business Services Total GVA per head ( 000's) 26 24 22 20 18 16 14 12 10 R 2 = 0.94 NI WW GL SE YH SW EM SC EN NW NE WM 10 15 20 25 30 35 Employment in financial & business services (% of total)
Concentration of business services, 2003 Ten most concentrated areas Region Unitary Authority % of Total Employees South East Woking 37.0 South East Bracknell Forest 36.9 South East Hart 34.3 Greater London City of London 33.9 South East Windsor and Maidenhead 33.6 South East Vale of White Horse 33.4 Greater London Westminster, City of 32.1 South East Wokingham 32.1 South East Wycombe 29.8 Greater London Camden 29.4 Ten least concentrated areas Region Unitary Authority % of Total Employees Northern Ireland Fermanagh 3.0 South West Isles of Scilly 3.0 Northern Ireland Down 2.8 North East Wansbeck 2.8 Northern Ireland Moyle 2.7 Northern Ireland Carrickfergus 2.7 Northern Ireland Larne 2.5 Northern Ireland Magherafelt 2.4 Northern Ireland Limavady 2.0 Northern Ireland Strabane 1.8
Concentration of financial services, 2003 Ten most concentrated areas Region Unitary Authority % of Total Employees Greater London City of London 46.5 Greater London Tower Hamlets 25.1 Scotland Edinburgh, City of 16.0 Eastern Norwich 13.5 Eastern Southend-on-Sea 13.3 South East Reigate and Banstead 12.8 North West Chester 11.6 South West Bournemouth 11.6 South West Poole 10.7 South East Worthing 9.5 Ten least concentrated areas Region Unitary Authority % of Total Employees South West Forest of Dean 0.7 Yorkshire & Humber Selby 0.7 South West Purbeck 0.7 East Midlands Corby 0.7 Northern Ireland Castlereagh 0.7 East Midlands Daventry 0.6 Northern Ireland Antrim 0.6 West Midlands North Warwickshire 0.5 North East Teesdale 0.5 East Midlands Bolsover 0.4
MFG Employment & Per capita GVA GVA per Head 2003 26.00 24.00 22.00 20.00 18.00 16.00 14.00 12.00 10.00 y = 0.1285x 2-3.8255x + 41.586 R 2 = 0.9467 5 7 9 11 13 15 17 19 MFG Emp Share of Total Emp
Concentration of manufacturing, 2003 Ten most concentrated areas Region Unitary Authority % of Total Employees East Midlands Corby 36.6 North West Pendle 35.2 Wales Flintshire 34.4 North West Fylde 33.9 North East Sedgefield 33.7 North West Copeland 33.3 Wales Blaenau Gwent 31.6 North West Ribble Valley 31.0 North East Derwentside 29.9 Wales Caerphilly 29.5 Ten least concentrated areas Region Unitary Authority % of Total Employees South West Weymouth and Portland 3.8 Greater London Kensington and Chelsea 3.8 Greater London Barnet 3.5 South West Bournemouth 3.2 Greater London Westminster, City of 3.1 South West Isles of Scilly 3.1 South East Epsom and Ewell 2.8 Greater London Lambeth 2.6 North East Castle Morpeth 2.4 Greater London City of London 1.1
Conclusions There is a clear positive return to education at every level: Personal Regional National At regional level the % of graduates in the private sector has a large impact on average wages and hence on productivity and per capita GVA The main task for regional economic development should be to attract graduate-employing firms. Many of these are to be found in financial and business services.